Dollar Strengthens and U.S. Stocks Extend Rally

December 4, 2017

The mounting likelihood of a huge U.S. tax cut is dominating world financial markets. The possibility of a federal government shutdown on Friday is not impacting. Sterling has also been in demand, aided by more constructive Brexit discussions.

Overnight dollar gains amount to 1.1% against the kiwi, 0.9% relative to the Swiss franc, 0.6% vis-a-vis the yen, 0.5% versus the euro, 0.2% relative to the Australian dollar and 0.1% against the loonie and yuan. Sterling has outpaced the dollar by 0.1%.

The DOW is up 1.2%, and the S&P is 0.6% firmer. Share prices in Europe have traded up 1.6% in Germany, 1.4% in France, 1.3% in Spain, 1.0% in Switzerland and Italy, and 0.5% in Great Britain. Asian markets closed mixed, with South Korea and Indonesia rising 1.1% and 0.8% but Hong Kong, Japan, Singapore and China losing 0.6%, 0.5%, 0.3% and 0.2%.

The gain in equities has been at the expense of fixed asset investments and commodities. Ten-year sovereign debt yields are up 6 basis points in the U.K., 3 basis points in Germany and the U.S., and one basis point in Japan. West Texas Intermediate crude oil and Comex gold have registered losses of 1.3% and 0.4%.

To dispel some market talk about a less accommodative stance coming to Japan, Bank of Japan Governor Kuroda repledged that Japan’s very expansive monetary policy will be maintained.

J.P. Morgan’s global purchasing managers manufacturing index climbed a half-point in November to an 80-month high of 54.0.

Malaysia’s purchasing managers index rebounded 3.4 points to a 43-month high of 52.0 in November.

And Indonesia’s manufacturing PMI, which had dipped 0.3 points in October returned to the September level of 50.4 in November. The sub-index for input price inflation climbed to a 5-month high.

Singapore’s PMI rose 0.3 points to a 2-month high of 52.9 in November.

Mexico’s manufacturing PMI reading of 52.4 was also at a 2-month high in November.

Financial market sentiment toward the euro area, as measuredĀ  monthly by the Sentix gauge, slipped by 2.3 point to a 2-month low of 31.7 but was only the second score above 30.0 registered this year.

Japanese consumer confidence advanced to a 50-month high in November of 44.9 from 44.5 in October and 43.9 in September.

On-year growth in Japan’s monetary base continued to decelerate in November, falling to 13.2% from 14.5% in October, 15.8% in the third quarter, 18.7% in 2Q, 21.4% in 1Q, 25.0% in 2016 and 34.0% in 2015. The Bank of Japan’s balance sheet widened to 521.9 trillion yen at the end of November from JPY 476.5 trillion at the start of this year.

The British construction-sector purchasing managers index jumped much more than forecast in November, led by residential housing and printing at a 5-month high of 53.1 after 50.8 in October.

Producer prices in the euro area rose 0.4% in October, matching the average monthly increase in the previous two months. Over the latest 12 months, the PPI climbed 2.5%, with energy advancing 3.1% and all other producer prices collectively rising by 2.3%.

U.S. factory orders dipped 0.1% in October but surpassed their year-earlier level by 5.2%.

The Confederation of British Industry released a revised GDP growth projection of 1.5% both this year and next, followed by a lesser 1.3% in 2019.

Spanish unemployment of 3.47 million workers in November constituted an 8-year low.

Greek GDP growth slowed in 3Q to a 0.3% quarterly rate from 0.5% in 2Q, but on-year growth rose to 1.3%.

Turkish CPI and PPI inflation accelerated to 13.0% and 17.3% in November. Indonesia posted total CPI and core CPI rates of 3.3% and 3.05% last month.

Australian corporate profits dipped 0.2% last quarter on top of a 3.3% slump between the first and second quarters of 2017. AussieĀ  job ads were 1.5% greater in November than October.

Finance ministers in the euro area are meeting today.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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